Liquor changes could push up prices

VICTORIA – When the B.C. government announced its latest changes to liquor distribution, the reaction was not what I expected.

Private store representatives complained bitterly that the government is allowing further expansion of fridges and “cold rooms” in selected government liquor stores, and longer operating hours that include more Sunday openings. Those hours, along with non-union staff, are the private stores’ big advantages as things stand in B.C.’s hybrid liquor retailing system.

The B.C. Government Employees’ Union didn’t seem at all perturbed that state-run stores’ key advantage was also going to be gone effective April 1. That would be preferential wholesale pricing, in which the government’s monopoly wholesaler sells to them at cost and to private stores at higher rates.

How much higher? Liquor Distribution Branch officials were carefully vague on that, and it varies depending on which of the 22 wholesale categories you look at. They released a graph that suggests the average wholesale cost to government stores might be going up 10 to 15 per cent to create a “level playing field” with private stores.

That wholesale price difference is the main reason private stores have generally higher retail prices. And the majority of the province’s revenue of nearly $1 billion a year comes from this monopoly wholesale business, where the hidden tax is coyly termed a “mark-up.”

When the new, simplified system comes in next spring, a bottle of hard liquor will have a “mark-up” of 124 per cent. That’s right, LDB more than doubles the price with its wholesale liquor tax. And if it’s premium booze, anything valued at more than $21 a litre will get an extra luxury tax on top of that.

Coolers and ciders will see a 73 per cent mark-up. Wines are taxed at 89 per cent, with extra luxury tax on premium wines. Beer gets a per-litre tax with ascending rates for small, medium and large breweries. Then of course there is federal and provincial sales tax applied to all of it. Cheers!

Premier Christy Clark acknowledged that the first guiding principle of this overhaul is to keep that government revenue coming.

The new BCGEU president, Stephanie Smith, doesn’t sound like your bullhorn-toting socialist of yore. She insists she’s gung-ho to compete head to head with those private interlopers and get back some lost market share, particularly on the high-volume cold beer sales.

The union has another ace in the hole. Its current contract stipulates that LDB can’t close stores. In some small towns there are government stores that lose money, particularly since they’ve had more private competition. But at least for the duration of this BCGEU contract, the government retail arm will continue to operate in some places as a perverse social program, subsidizing retail clerk jobs that pay nearly twice what private retail pays.

And let’s face it, running a till at a liquor store is not rocket surgery. Private and government store staff have to take the same training, and liquor inspector sting operations have increased vigilance on ID checks in all stores.

With higher wholesale prices applied to government stores, this kind of artificial support will cost more. The only way LDB could maintain it without subsidizing it from the wholesale windfall would be to raise retail prices.

The LDB says this new simplified system is “not intended to impact consumer pricing.” Note the careful choice of words.

Oh, one last thing. There is another new tax in the works. It will be applied to higher-alcohol beverages, in an effort to reduce adverse health effects.